Four Key Steps to "No Regrets" Retirement

by Dianne Molvig

If you're putting off planning for your post-work years, you might want to have a conversation with someone who's already retired. It could spur you into action. Consider that:

Fifty-seven percent of retirees expressed regrets about the financial decisions they'd made while still working, according to a Consumer Reports National Research Center online survey released in early 2011.

Only 28% of retirees were "highly satisfied" with their retirement preparations, according to the same survey.

Which group will you end up in when you retire? The financial decisions you make today are shaping the answer, even if your retirement is decades away.

Here are four key tactics that will help you avoid the regrets many retirees experience.

1. Live within, or below, your means

Many of retirees' regrets about preretirement financial decisions stem from mixing up needs with wants during their working years, points out Daniel Woodard, a financial adviser with EECU Investment Services in Fort Worth, Texas.

For instance, some people buy a bigger house, rather than one they can comfortably afford. They get a fancier car than they need, and they pull out their plastic cards to add to their cache of consumer stuff. Meanwhile, their retirement savings languish.

Avoiding that predicament depends on being realistic about what you can and cannot afford, Woodard advises. "You have to have the personal discipline to know when to say no to yourself," he says. "As an adviser, I'll ask someone, 'Would you prefer to be able to stay retired someday and eat, or would you rather buy that new car now?' Those are the sorts of choices they have to be willing to make."

Only 28% of retirees were "highly satisfied" with their retirement preparations.

2. Educate yourself about your investments

Other regrets about retirement planning result from people's lack of understanding about their investments, says Woodard. Too often they simply hand over money to an investment adviser or broker and hope that somehow the money will grow into what they'll need for retirement. A smarter approach, Woodard says, is to educate yourself about your investments.

"I'm here to help my clients navigate through their investment decisions," he says. "It's important for them to ask questions, to learn about the risks involved, and to be comfortable enough with me or any adviser to say, 'I really don't understand this.'"

Investors who are educated and have realistic expectations won't fall victim to disillusionment, which often leads to bad financial moves followed by later regrets. People hop from one investor to another or shift their money in and out of various mutual funds, chasing after the magic solution, Woodard explains.

"But a lot of it is just market cycles," he says. "It's not a matter of being in the 'right' mutual fund or buying the 'right' stock or having the 'right' adviser. Nobody has a secret formula."

3. Start saving and planning for retirement now

Starting to save too late for retirement is another common lament among retirees. In the Consumer Reports survey mentioned earlier, 39% of respondents said they wished they'd begun saving sooner.

Focus on life goals rather than on "the numbers" in planning for retirement.

"I've read reports showing that most people don't start thinking about or saving for retirement until they're in their mid-40s," says Barbara Koontz, a financial adviser with OSU Federal Credit Union through CUSO Financial Services L.P. in Corvallis, Ore. She advises her clients to start much younger.

Young families, who also may be saving to buy a house and pay for their children's college education, should include retirement savings in the mix, too, because of the advantages of compounding. Remember, you can borrow to buy a house or for higher education; you can't borrow retirement funds.

"If you start earlier," Koontz says, "you will create more choices for yourself and take a proactive approach to planning your retirement, just as you would to planning your landscaping. You could think of it as designing your retirement landscape."

Everyone, of course, knows they should build savings. But roadblocks pop up in life, and all too often retirement saving gets pushed aside. But staying determined to save for retirement is half the battle. "Design your budget so you can save at least a little bit," Koontz advises. "Even if you don't feel you can, make a way."

4. Envision what you want your retirement to be.

A 2010 survey by Merrill Lynch asked retirees who had $250,000 or more to invest to give advice to people who were still working. Topping their list was "build a plan around what is most important to you in retirement." Just over half of the respondents said they wished they'd focused more on their "life goals" than on "the numbers" in planning for their retirement.

Starting to save too late for retirement is a common lament among retirees.

Such advice strikes a chord with Koontz. That's why she has the "what do you want your retirement to look like" discussion with her clients. First they need to have "a values-based conversation with themselves," she says, to explore such questions as: What do I plan to do? How and where do I plan to live? "Then we can look at their projected retirement net worth," Koontz says, "and see if it will support that design."

Substantial unknowns, of course, hover over efforts to plan for the future: our health status, longevity, the rate of inflation, and many other factors. We can't know exactly how much money we'll need during retirement. One common rule of thumb suggests our retirement income should be at least 80% of what we earned while working to maintain the same lifestyle.

Koontz doesn't employ such a guideline with her clients. Rather, "We customize a plan, based on an individual's personal scenario," she says. "First, we take an inventory of exactly where they are, and then we plan with a best guess, based on their situation and the research we've done."

That kind of planning helps ensure that your retirement, far off as it still may be, will match your dreams. You won't wind up being one of those retirees with regrets.

"There's an old saying: 'Most people don't plan to fail; they just fail to plan,'" Koontz says. "I encourage folks to start planning for retirement, even if you can't put all the pieces in place yet. Just start."